Disney buyback is big; more companies are increasing their share count

Disney buying back $6 to $8 billion in shares is a big number...that's about five percent of the $117 billion market cap of the company. Now it has to go ahead and buy the stock back.

It's a big deal, but it pales in comparison to Apple this quarter. Apple has just completed the biggest quarterly buyback of any company in history.

That's right: any company in history. $16 billion so far. That beats the old record for a buyback in a single quarter, which was held by IBM. Big Blue bought back $15.7 billion in 2007.

That's huge: Apple was 13.5 percent of all buybacks in the third quarter.

Here's the funny thing about buybacks: there's plenty of companies going the other way. There's plenty of companies that are INCREASING their share counts this quarter, rather than DECREASING them.

According to S&P Capital IQ, this quarter 242 increased their share count, compared to 225 who decreased their shares. By share count, I mean stock that is free and clear to trade. It could beheld by the public, or by insiders.

Why are more increasing than decreasing their share count? There is some M&A, but more importantly there are an awful lot of secondaries. In fact, that has been the case all year.

I'll give you an example: in the last two days, there have been 25 secondaries. There are seven more price tonight. Some are smaller companies, but that is a lot by an measure in two or three days. So far this year, according to IPOfinancial.com, there have been 485 secondaries, compared to only 350 for the same period last year,which was also a strong year.

What's going on? First, a strong stock market is the primary driver of both IPOs and secondary offerings. When you have a strong market, you have a much higher chance of success in both areas.

But that just addresses the timing issue. The main reason companies are issuing secondaries is that they need the cash.

Why wouldn't companies issue debt rather than new shares? Why dilute shareholders if you can avoid it?

There's several reasons why you might prefer equity over debt. Some CEOs don't want to leverage the balance sheet.

Some companies may not have the ability to finance large amounts of debt. Some companies--like biotech--can't raise debt because they don't have any cash flow.